POLITICS

ANC has a strange ideological hatred for business - James Lorimer

DA MP says party's plans will damage mining industry at a time of reduced profitability

ANC picks the wrong option on mining again

It is no surprise to find that resource nationalism has just been identified by international accounting heavyweight Ernst and Young as "the number one risk for mining and metals companies around the world" (see here). A number of international ratings agencies have recently highlighted the same concerns. 

When will the ruling party start to acknowledge the evidence and start picking the right options?

Ernst and Young's 'Business risks facing mining and metals 2012/13' report attributes the global risk to an ‘expanded footprint' of resource nationalism, which often includes a complex web of government interventions such as mandated beneficiation, the banning of exports of unprocessed raw materials, limits on foreign ownership and super-taxes on large profits. These are the very things that the ANC has endorsed on the back of its ‘State intervention in the minerals sector' (SIMS) document released in January.

When there is a policy decision to be made in the mining sector, the ANC can reliably be expected to choose the wrong option. Despite optimistic reports to the contrary, the ruling party has not yet definitively decided to drop mine nationalisation in favour of its slightly less evil twin, a combination of a mineral resource rent tax and expanded state mining company. This follows the ANC's record of doing everything most guaranteed to shrink South Africa's mining sector with the concurrent loss of government revenue and, most importantly, jobs.  

Over the past ten years, both the Mineral and Petroleum Resources Development Act (MPRDA) and Mining Charter have had a significant impact on the South African mining industry. These regulatory frameworks have no doubt contributed to the fact that South Africa's mining output in February was the lowest in 50 years, and that the industry lost 179,000 jobs between 2001 and 2011.

In the ANC's current drive to transform the mining industry both the MPRDA and the Mining Charter fall under the broad heading "resource nationalism". 

The evidence is now clear that these proposals will cause South Africa to lose even more global market share in the mining business at the very time that we should be seeking to gain on our competitors. Australia, for instance, has just implemented a mineral resources rent tax on coal and iron-ore. The South African government should use this opportunity to grow our share of the market in these minerals and thus create the jobs that invariably follow such growth. 

The global economic downturn, predicted to dip drastically again next year, is already threatening the long-term profitability of our mining industry. Along with domestic concerns of insecure electricity supply, labour volatility and ore bodies being increasingly expensive to access, the industry does not require further obstacles from a government intent only on extracting rent rather than creating jobs. 

Even the ANC's options that are slightly more palatable than outright nationalisation are antithetical to investment in the minerals sector. The ruling party continues to labour under a strange ideological hatred for business (unless they are direct beneficiaries). In the process, they ultimately jeopardise the ability of industry to lift thousands out of poverty through job creation and undermine the very profitability required to earn tax revenue which could be used to create an environment conducive to growth.

As international evidence against resource nationalism continues to mount we wait with baited breath for a fresh policy perspective from the ANC. 

Statement issued by James Lorimer MP, DA Shadow Deputy Minister of Mineral Resources, July 9 2012

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